The Role of Industry Studies and Public Policies in Production and Operations Management

Drug shortages have been a major challenge facing the US pharmaceutical industry and government in recent years. Although the problem has drawn tremendous attention from the government and media, limited academic research has been devoted to this problem, and few solutions have been proposed based on rigorous research. This study addresses the drug shortage problem from a supply chain perspective, a key aspect missing in the literature, and proposes to mitigate shortages through drug purchase contracts. By modeling the drug supply chain, we capture the objectives of various supply chain parties, and investigate Pareto‐improving contracts that mitigate drug shortages, improve drug manufacturer's and group purchasing organization (GPO)'s profits, and cut government spending and healthcare providers’ costs. We explore structural properties of key supply chain decisions and the Pareto‐improving contracts, and conduct scenario analysis with realistic industry data to evaluate shortage mitigation solutions. Our analysis shows that increasing drug prices only, a solution advocated by many, is not very effective in shortage mitigation. Price increases must be paired with strengthened failure‐to‐supply clauses (called the IPS approach) to achieve consistent and significant shortage reduction as well as Pareto improvement. Across all scenarios tested, a 30% price increase under IPS can lead to a minimum, average, and maximum shortage reduction of 25%, 53%, and 70%, respectively. Our analysis also shows the impacts of IPS on different parties in the supply chain and the impacts of various model parameters on shortage mitigation. The IPS approach rewards reliability of drug supply, which is in line with the FDA's strategic plan to reward quality, but is easier to achieve in this regulation‐based industry. Interactions with the government and industry practitioners indicate that IPS also challenges the current mindset in pharmaceutical contracting.

Section: Ending Remarksmentioning

confidence: 99%

Mitigating the U.S. Drug Shortages Through Pareto‐Improving Contracts

Jia

Zhao

2017

“…Given the long history of regulation and public investment, the potential for dual‐causality between operations and public policy decisions (Joglekar et al. ) is especially strong in the electric power industry. One motivation for this study is, therefore, to establish a roadmap for future OR/MS research that will take into account the mutually interacting dynamics between operations and public policy decisions in the electric power industry.…”

Section: Introductionmentioning

confidence: 99%

Electric Power Industry: Operational and Public Policy Challenges and Opportunities

Parker

Tan

Kazan

2019

The electric power industry is undergoing dramatic change driven by rapid technological transformation, concern over climate change, and evolving market structures. As a result, there is a need for new models to help the industry better utilize resources in a time of increasing uncertainty and to help government policy makers better understand the impacts of their regulatory decisions. We provide a structured review of the operations research and management science literatures to describe the current operational and policy issues in the electric power industry, with a particular focus on issues surrounding electricity market design, renewable integration, effects of climate policy on electric power infrastructure, rise of electric powered vehicles, energy storage, and the growing interdependence between natural gas and electric power sectors. We identify the current research frontier and classify the existing research into clusters with respect to managerial issues addressed. We offer a forecast for where the electric power industry is going and describe some important public policy issues. Finally, we highlight research opportunities and discuss how the management science community can contribute by considering the interaction between operational considerations and electric power policy.

“…We follow the general approach used in many industry studies (e.g., see Joglekar et al. ), by utilizing in‐depth case studies of quality problems from the automotive industry to develop parsimonious analytical models that enable us to provide insights on managing quality performance in automotive supply chains.…”

Section: Introductionmentioning

confidence: 99%

How Sourcing of Interdependent Components Affects Quality in Automotive Supply Chains

Agrawal

Muthulingam

Rajapakshe

2017

In the automotive industry, many firms source key components from different suppliers, even though the components may function interdependently. In this study, we investigate how component level interdependence impacts quality performance and analyze how various operational factors moderate this relation. We synthesize information from several case studies to model the quality challenges faced by an automotive firm. For several sub‐assemblies that go into its products, the firm sourced key components from two different suppliers. The sub‐assemblies would fail whenever a component fails, but due to interdependent operations, failure of one component could cause the failure of the other. The firm found it challenging to improve the suppliers' quality performance as it was difficult to trace the failures to specific components. Our analysis reveals that – (i) the impact of interdependence is governed by the supply chain structure: reducing the interdependence between components improves quality when suppliers provide the components, but reducing interdependence worsens quality when the firm manufactures the entire sub‐assembly; and (ii) the relation between interdependence and quality performance is moderated by factors such as penalties, production costs, and interdependence costs. Additionally, we find that quality performance is lower when the firm outsources the components than when the firm manufactures the entire sub‐assembly. We identify coordinating mechanisms that leverage incentives and penalties to bridge the quality performance gap.